If your company can’t pay its tax bill, HM Revenue & Customs (HMRC) can take action to make the company repay what it owes. This action could include County Court Judgments (CCJs) and, at worst, a winding-up petition; formally closing and liquidating your company.

To prevent escalation, you should act quickly. There are options available to you:

• Contact HMRC and negotiate an informal Time to Pay Arrangement (TTP)
  A Time to Pay Arrangement (TTP) is an agreed, informal arrangement with HMRC that allows a company to repay its tax bill in an agreed timeframe. Before being granted a TTP, the company must demonstrate that it can maintain the required repayments. Repayment periods may vary but can last between three, six, and occasionally 12 months.
  More on personal liability for company debt
• Formal repayment arrangements
  A Company Voluntary Arrangement (CVA) could be a viable option for company directors who feel they’d have a genuinely profitable business were it not for the debts. CVAs involve paying a company’s creditors a monthly, affordable portion of their debt while the company continues trading.
  Read more about Company Voluntary Arrangements

• Explore company closure through liquidation
  If your company is struggling under creditor pressure and there’s little chance of repaying the debts, you can close the company via a Creditors’ Voluntary Liquidation (CVL). Doing so draws a line under the debts as they die with the company’s closure, removing creditor pressure and allowing the directors to move on.
  Read more about Creditors’ Voluntary Liquidation

What HMRC bill can’t your company repay?

Getting into debt with HMRC is a common problem, and a company could be hit with different tax bills at different times. These tax bills could include, but are not limited to:

• Corporation Tax
• Value Added Tax (VAT)
• National Insurance (NI)
• Pay As You Earn (PAYE)

HMRC take non-payment very seriously. Failing to pay VAT on time can leave you open to surcharges. Failing to pay PAYE, NI or Corporation Tax can leave you open to tax penalties, worsening your situation. These penalties can increase over the tax year depending on the number of defaults. HMRC will charge interest on overdue amounts from the due date until the date the company pays.

Large arrears can indicate cash flow problems and sometimes insolvency, meaning HMRC may further investigate the company’s tax affairs.

Can I be held personally liable if the company can’t pay its HMRC tax bill?

Under normal circumstances, a limited company and its director are separate entities, and the limited company’s debts won’t affect the director’s personal finances and vice versa. However, there can be circumstances wherein a director may have acted unlawfully before or during insolvency, have personal guarantees, or have an overdrawn director’s loan account (DLA). In this case, the director can be held personally liable if the company can’t pay its HMRC tax bill.

Trading whilst insolvent could also result in personal liability for the company’s debts, including any unpaid taxes.

Additionally, in some circumstances, legislation allows HMRC to take recovery action directly against directors of companies with liabilities owed to them, effectively treating them personally liable for the unpaid amount.

What are HMRC’s powers?

Should you ignore their reminders, HMRC can take further action to recover what your company owes.

• County Court Judgments (CCJs)
  If you can’t contest a debt, it will be proven in court. If the company can no longer pay that debt, it indicates the company is insolvent. The creditor, such as HMRC, can then issue a County Court Judgment (CCJ). Failing to address a CCJ, either by repaying or having it set aside in the allotted time, means it will stay on the company’s credit file for six years, making it harder to secure credit in the future.
  More on County Court Judgments
• Distraint order
  HMRC can serve a ‘distraint order notice’, which can be used to seize assets or stock. They won’t take items that impact the company’s ability to work or ‘tools of the trade’, but assets or stock deemed redundant could be taken.
  More on HMRC’s powers of distraint
• High Court Enforcement Officers (HCEOs)
  If you ignore reminders to pay your HMRC tax bill, they can send bailiffs or High Court Enforcement Officers (HCEOs) to collect items equal to the debt’s value, which are then sold to recover the amount.
  If the debt is a company’s, the bailiffs and HCEOs should only visit its registered address. While they can seize a company’s assets, they cannot take anything on lease, hire purchase, or items essential to keep the company running.
  More on bailiff powers
• Winding-up petition
  If the company owes more than £750, HMRC can issue a winding-up petition. When advertised, a winding-up petition leads to the company’s bank accounts being frozen, making trading impossible, and resulting in the company’s forced closure through compulsory liquidation.
  More on winding-up petitions

Can I repay other creditors before HMRC?

With the threat of HMRC winding up your company, it may be tempting to repay them before your other creditors. However, if your company is insolvent, you shouldn’t pay anyone directly without speaking to a licensed insolvency practitioner.

There is a payment hierarchy that should be adhered to. Deviating from it can lead to accusations of creditor preference or making a preference payment.

How we can help

If you find you’re behind on payments or your company can’t pay its HMRC tax bill, you do have options. If you’re unsure of the best way to move forward, contact us for free, impartial, non-obligatory advice.

Our experienced initial advisors can discuss your concerns over your company’s debts to HMRC. We can also discuss the company’s solvent position and assess its options.

1. Contact our initial advisers via phone or online chat. If we can help, we will arrange a free consultation with a consultant to discuss your situation in more depth.
2. During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or what alternative options are available.
3. After your consultation, if there is an appropriate route forward, we will issue the relevant documentation for you to formally engage us.

In summary

If your company can’t pay its HMRC tax bill, they will do everything they can to reclaim their money. A large, unpaid tax bill can indicate bigger problems within a company, so it’s essential to tackle the issue head-on and not bury your head in the sand; otherwise, the problems could worsen.

Case Studies

Derwent Castings Limited

Kelly Burton • Metals • Creditors Voluntary Liquidation (CVL)

Unsecured creditors owed money by a Derbyshire manufacturing company which went into liquidation are to receive a higher than the expected dividend of 60p in the pound.

A total in excess of £128,000 is due to be distributed to unsecured creditors of Whatstandwell-based Derwent Castings Limited, whose claims totalled over £192,000.

The company, whose roots date back to the 1940s, had traded profitably for a number of years but in late 2013 / early 2014 saw the cancellation of its largest sales contract which represented 70 per cent of its turnover.

Bosses at the company, which employed 16 staff including three directors, struggled to attract replacement business and had to drop prices. Further business was lost as a result of foreign competition.

Sheffield’s insolvency specialist Wilson Field was called in as liquidator and worked with the creditors’ committee of Derwent Castings Limited to secure the positive dividend.

Andy Wood, associate director and insolvency practitioner at Wilson Field said:

“Dividends for insolvent companies are generally low, or nothing, for a variety of reasons – cost of staff redundancies, difficulty collecting outstanding invoices, selling assets in a forced sale situation, selling specialist assets which have limited appeal to purchasers, deteriorating or perishable assets, as well as other costs involved.

“However, thanks to a very positive relationship with the creditors committee, I am delighted to return a healthy dividend to the unsecured creditors in the region of 60p in the pound.

“The supply chain is often greatly affected by a liquidation and in this case we have been able to help creditors.”

Derwent Castings Limited was incorporated in August 2002 and specialised in iron casting from the five-acre Derwent Foundry site at Whatstandwell near Matlock.

However, the iron founding operation at Derwent Foundry was first introduced back in 1946 by Wragg & Hawksley which produced cast iron pipes for the water industry.

In 1950 the foundry was acquired by WH Davis & Sons Ltd to supply castings for their railway wagon building business. Following a management buy out in 1984, the company was renamed Derwent Foundry Ltd and following its closure in July 2002, was bought by its present owners and renamed Derwent Castings Ltd.

Amongst jobs carried out on site were moulding using loose pattern and modern air setting (boxless) sand systems; metals work using the latest in electric induction melting producing a wide range of grey, SG and alloy irons; an independent Namas approved test laboratory, finishing, pattern making and machining facilities.

Statestrong Limited

Kelly Burton • Manufacturing • Administration, Creditors Voluntary Liquidation (CVL)

Insolvency experts Wilson Field has helped turnaround the fortunes of a loss-making manufacturing company in Lancashire providing a new future for its 80 employees.

Businessman Russell Blaikie acquired the struggling 40-year-old Statestrong Limited, headquartered in Lytham St Annes, through a pre-pack sale and has been able to help the company immediately utilising his expertise in manufacturing and management.

Arrangements for the purchase of Statestrong’s business and assets were negotiated by Sheffield business specialists Wilson Field who affected the sale shortly after being appointed.

The company, which manufactures and supplies aerosol and liquid products for use in health and beauty, household, automotive and industry globally, posted sales of £12m last financial year, but had suffered pressure from creditors with outstanding arrears.
The total value of the deal is undisclosed but includes the business and the assets of the company based on Boundary Road in Lytham St Annes and Tarporley in Cheshire, which will now trade as Statestrong Products Limited.

Mr Blaikie said:

“Transactions of this nature are sensitive and require careful handling. The team at Wilson Field provided exactly the right professional approach.”

Wilson Field’s insolvency practitioners Kelly Burton and Joanne Wright worked closely with Mr Blaikie along with senior corporate case administrator Gareth Kinneavy.

Kelly Burton, said:

“The company had a wealth of expertise but was straddled with financial liabilities which ultimately made its future questionable. Looking forward, a previously distressed business now has a viable future.”

Designer Recliners Limited

Kelly Burton • Manufacturing • Administration, Company Voluntary Arrangement (CVA)

A Sheffield furniture manufacturer and upholster has relaunched offering a smaller, more specialised range of products.

Anico Interiors Limited, which included reclining chairs for the elderly, had suffered cash flow problems and issues with profitability.

Designer Recliners Limited, managed by director Nick Wall, has purchased the assets and business of Anico saving all 11 jobs.

Andy Wood and Robert Dymond from Sheffield business turnaround experts Wilson Field were appointed joint liquidators on 8 June and advised on the sale of the 14-year-old company, based on Orgreave Crescent at Orgreave Industrial Estate, as a going concern.

Andy Wood, associate director and insolvency practitioner at Wilson Field said:

“Historically, the company offered a wide range of products but has now streamlined its offer to customers and cut out some unprofitable lines, as well as re-vamped its web site.

“Directors took advice from Wilson Field with the business sold to new company Designer Recliners Limited as a going concern, safeguarding all 11 employees’ jobs. The new company will offer the same service and standards under the same management team but focus on a smaller range of specialised products.”

The company employs skilled staff including upholsterers, seamstresses and cutters and was set up in 2002 by Nick Wall.

💬 Live Chat - Available

✅ Free confidential help & advice

If you or your company is in financial difficulty, I may be able to help you. Our phone lines operate 9am until 9pm - 7 days a week.

Chat With MeFor immediate help & free advice, please freephone:

Free Consultation

Request a free confidential telephone consultation from 9am - 8pm, 7 days a week.

Call Now Schedule a Call

Back

Please leave this field empty.